The RNRB stands for Residence Nil-Rate Band. It's a tax allowance in the UK, introduced in 2017, that provides an additional inheritance tax (IHT) exemption on the value of a person's home when it is passed to direct descendants (like children or grandchildren).
Here’s how it works:
- Eligibility: The RNRB is available if you pass your main home to your direct descendants upon your death.
- Amount: The band starts at £100,000 in 2017/18 and increases in subsequent years. For 2021/22, the RNRB is £175,000. It is frozen at this level until 2026/27, which means it won’t increase with inflation.
- Tapering: The RNRB starts to taper away if the value of your estate exceeds £2 million. For every £2 over the threshold, the RNRB is reduced by £1.
- Combined with the Nil-Rate Band (NRB): The RNRB is in addition to the standard Nil-Rate Band (NRB), which is £325,000 per person as of 2021/22. This means a couple could pass on up to £1 million (£325,000 NRB + £175,000 RNRB for each person).
For example, if a couple's estate is worth £1.5 million and they leave their home to their children, they could benefit from both the NRB and the RNRB, which could reduce the amount of inheritance tax (IHT) payable.
It’s a useful allowance, but there are rules and limits depending on the size of the estate and how assets are distributed.
